The market has priced in all the bad things

US President Donald Trump’s “Liberation Day” sent stock markets tumbling around the world, including the Tel Aviv Stock Exchange. Phoenix Investment House CEO Avner Hadad, who is also joint CEO of subsidiary Kesem, the largest mutual funds manager in Israel (NIS 110 billion under management), says that, up to yesterday afternoon, he has seen “no great panic among customers.” “When you look at the stock indices in Israel, for the year to date and also for the past twelve months, you see that they have performed better than other indices around the world. I think that Israel will also continue to lead in respect of volatility resulting from the falls around the world in the past few days,” he says.

Despite the internal polarization in Israel and the attempts to remove the attorney general and the head of the Shin Bet?

“Yes. In the end, investors believe in the companies and in their managements. It’s clear that what’s happening all around doesn’t help and doesn’t do us good, but it’s also clear that if all that calms down, things will be even better. Israel is on the up despite the general situation.”

By contrast, Hadad sees the situation in the US as somewhat different. “A year ago, I said that the US was in a position in which the indices were pricing in only opportunity and no risk. That was the reverse of the picture in Israel at that time. Here, the indices were only pricing in the risk, and no opportunity. What’s happening now is that the indices in the US are also starting to price in the risks.

“In the past few months, we have seen significantly growing volatility. The fear index exemplifies that best (the VIX index has more than doubled in three sessions, S. H-V.). But if you analyze the leading indices historically, you can see that we are entering into territory that starts to be interesting for investment. The situation is similar to what happened with the Covid pandemic, in 2008, and in other events – sharp, rapid, very violent falls, that in the perspective of time can create opportunities.”

Hadad stresses, however, that this is not a matter of opportunities for short-term investors. “No-one has any idea what will happen tomorrow. The event could last weeks or more. But if you look at investments the way you should look at them, for the long term, the US is interesting for investment for a timescale of months or longer. It takes stamina.”

Asked how long the market decline will last, Hadad responds, on the basis of similar events in the past, that he estimates that it will be a matter of a few weeks.

What could end the event?

“It’s hard to know how these events will end. The dynamic is tough – assets have been ‘slaughtered’ in the past few weeks, and even beforehand the US market wasn’t particularly brilliant. We know from the past that it can go on for several weeks; in the crisis of 2008 it was longer, but the falls on the market were more moderate.”

What is chiefly worrying investors?

“What mainly scares the market is the uncertainty, when it’s impossible to know when the next thing will happen. For example, investors did not expect that China would respond so quickly to Trump’s tariffs. Nor is the president who sits in the White House known as one of the most predictable of people. The uncertainty is well priced into stock prices, but on the other hand I believe that it creates opportunities, such that in a few months or years we’ll say to ourselves ‘How could we not have exploited the opportunity?’”

Hadad gives an example of investors’ erroneous dynamic. “Just over a year ago, a friend of mine tried to explain to me with signs and wonders why a major stock on Wall Street traded at a multiple of 100 was an unrepeatable opportunity. This week, that same friend explained to me why, at a multiple of 30, it should be sold. I didn’t agree with him then, and I don’t agree now. It shows how panic is embodied in the markets. You have to take a deep breath, and look with a long-term view. There have been similar cases in the history of crises, and with much patience it’s possible to emerge from them stronger, but it takes time.”

Do you see Trump changing his mind about imposing the tariffs?

“It could happen, it certainly makes sense. He sees the markets. Perhaps he’ll say ‘Let’s talk, let’s negotiate, let’s examine things over a period.’ The point is that what is happening at the moment is that the market is pricing in all the bad things, and assuming that a global trade war will break out. From here, anything that is reviewed or fixed can only improve the situation. Perhaps the market will fall another 5-10% tomorrow, but anyone who goes into the market now, goes in when the risks are priced in, the opposite of where the US was a year and a half ago. And just as it wasn’t right then, it isn’t right today.”

“Investing in the US is great, but in Israel too

Asked if he thinks we have reached bottom, Hadad replies, “There’s no bottom from which you receive a message ‘OK, buy.’ As for the risk element, my sense is that we are in the region where it’s possible to start taking an interest in long-term investment, on the basis of prices on the market.”

Is it a good time to invest in indices, or for stock picking?

“I wouldn’t get clever with stock picking, especially in the US. What are the chances of knowing which stock will do well? In Israel, there’s certainly room for that, backed by research, but in the US it’s best to go for the leading indices, with a long-term perspective. If you want to increase investment in the US, that’s the right way to go about it, and not to look for a quick profit. There’s no need to try to guess the effect on this or that segment, because everything affects everything else. Go for big benchmarks.”

In recent years, ETFs tracking the S&P 500 have been a favorite of Israelis, and large amounts of savings have been channeled to them. Given the decline in the index, should the money be diverted elsewhere?

“It depends on the general make-up of the portfolio. For someone who invests in the stock market for decades, it’s a good track. All the research shows that it does the job. But I’m a little disappointed that those investors didn’t see fit to invest at least part of the money in Israel. That was a mistake. Investing in the US is excellent, but it’s a great pity that Israel didn’t receive a significant portion, from the point of view of the outcome as well.”

Where would you not invest today?

“I wouldn’t go looking for adventures or speculation. I wouldn’t try to be clever. Think simply, stick to the benchmark. In Israel, I actually would look for opportunities on the basis of research, because here research has value.”

Might we see a wave of redemptions in mutual funds?

“Perhaps. In March 2020, at the beginning of the pandemic, we saw redemptions from the funds, and then two months later a wave of buying started. Investors need to think hard about the aim of their investment, what it’s intended for, and whether it suits them. If the investment is good, it’s good, and it’s a mistake to exit from it. I’ve been saying this for twenty years, and there are still investors who react in a panic.” In any event, Hadad recommends considering including defensive products in the portfolio.

What about the money market funds?

“It’s a question of investor sentiment. These funds will take in money, and when the market starts to recover we’ll see the money going out. It’s a way-station.”

Published by Globes, Israel business news – en.globes.co.il – on April 8, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.